CEOs aren’t known for being wallflowers. Rather, they usually tend to develop special feelings for their very own reflection in the fashionable equivalent of Narcissus’s pool of water (their Zoom symbol).
Because of their – sometimes excessive – self-confidence and their great influence, CEOs are sometimes capable of influence situations of their favour. And a recent study published by the Stress Management Journal explains how narcissistic leaders lead their boards to riskier behavior.
What higher option to understand this manipulation than firsthand? Researchers examined the minutes of board meetings of 88 publicly traded corporations and 197 CEOs from the past 20 years. The researchers measured the extent of narcissism of an executive by the prominence of the CEO’s name and photos in press releases and annual reports, in addition to by the extent of his salary in comparison with the following highest-paid member of the chief team.
“Narcissistic CEOs tend to lead board discussions about risk-taking in a positive tone – especially when they are also the board chair. This allows them to allocate more resources to risk strategies,” the research team found.
According to the study’s authors, previous studies have found that a manager’s over-inflated self-esteem leads his company to take more risks. To use a seafaring metaphor, what happens, amongst other things, is that an over-inflated captain is more more likely to get into troubled waters.
But it isn’t nearly confidence. Narcissism motivates CEOs to take riskier steps to bolster their high self-esteem and overcome obstacles that give them the possibility for more attention and opportunities for self-development. Because of their self-centeredness, additionally they focus more on potential gains than losses when making decisions, the authors added, citing other studies.
How the risk-taking instinct of those CEOs is recognized and acted upon is one other query. It’s about encouraging the boards. One strategy of those narcissistic leaders is to fill the deck with individuals who admire them or agree with them, or are not less than easily influenced. After all, it’s easier to create that positivity in a room filled with yes-men.
Tone may influence the board, as CEOs may “use heightened enthusiasm and confidence to gain support,” perhaps aided by a narcissistic tendency to be charismatic. Narcissistic CEOs, drawn to risk, may downplay the negative potential of their decisions.
Finally, the researchers suggest that this leader type may use his charm when essential, using “gentle influence techniques to achieve his goals,” including flattery or bonding.
Narcissistic leaders’ ability to influence the board is even greater after they are also board chairmen, the authors explained. As chairmen, they’ll exert their influence by dictating the meeting agenda (and thus deciding how far to sidestep risks), selecting which experts to share their opinions with, and even choosing the situation, the researchers added.
“Boards need to be careful about when to have duality and when not to; when to give CEOs the title of chairman and when not to,” said considered one of the researchers, Cameron J. Borgholthaus of the University of Wyoming, in a Press release for the study. “This can be a good thing, but at the same time, many government reforms have been made to give boards more accountability and ensure that they are not manipulated.”
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